Tension rises over Woolworths’ $552 million PFD bid

Woolworths’ proposed $552 million investment in PFD Food Services has been described as “opportunistic” and formally opposed by the Australian Small Business and Family Enterprise.

Ombudsman Kate Carnell has written to the Australian Competition and Consumer Commission (ACCC) to oppose the deal, which would see Woolworths take a controlling 65 per cent interest in PFD. She says it would be detrimental to small businesses in the food distribution space and the economy more broadly.

Carnell describes the timing of Woolworths’ push into the food services sector as “opportunistic at best”.

Earlier this year the retailer outlined that the proposed acquisition would see it extend its strategic partnership with the foodservice network and acquire 26 freehold properties currently being used as distribution centres by PFD.

PFD is a wholesale food distribution business, suppling QSRs and commercial food service businesses such as P&C outlets, airlines, restaurants/cafes, hotels, institutions and supermarkets. Current owners, the Smith family, would retain a 35 per cent holding in PFD under the arrangement.

“Now that Woolworths has exhausted opportunities in the large supermarket space, it is moving into the smaller supermarket arena. Allowing Woolworths to buy PFD would significantly improve its competitive position against other smaller supermarket operators. Claims by Woolworths about plans to establish Chinese walls to prevent PFD passing on information about small supermarket competitors is questionable,” says Carnell.

“This deal would also dramatically impact on the food distribution market – many of which are small and family businesses – especially outside the major cities.

“Small food distributors are only now starting to get back on their feet after months of heavily restricted trade due to the forced closure of pubs, clubs and other commercial venues. To allow this deal to go ahead would be a real kick in the guts.

“I am also concerned about significant job losses as smaller suppliers and distributors would have a battle on their hands to compete, particularly if a major player like Woolworths moves into this sector.”

Last month, the ACCC announced that it would review the acquisition, saying it would focus on the impact it would pose to competition, and whether the acquisition would bolster Woolworths’ position as a wholesale buyer of food.

Carnell said: “I share ACCC Chair Rod Sims’ concerns about companies that have too much market power. Independent Food Distributors Australia (IFDA) estimates Woolworths – which already accounts for about a third of supermarket sales – would pick up a large chunk of the food services market as a result of this deal, setting smaller competitors up to fail.

“The ACCC should also consider the impact this deal could have on manufacturers and farmers. The last thing they need right now is a dominant market player putting price pressure on suppliers.

“Australian small businesses have been hit hardest by this pandemic and now is not the time for opportunistic takeovers by large corporations. Intervention by our regulators may be the only way to stop it.”

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